E-marketplaces are set to explode in Australia, with business-to-business transactions in the local market expected to top nearly $500 billion within four years.
While still barely in their infancy now, the impact of e-marketplaces on Australian companies is likely to be profound with Gartner Group predicting the local market will total nearly $500 billion ($US299 billion) by 2004.
E-marketplaces, otherwise known as business-to-business Web portals, promise huge efficiency gains and lower costs through electronic buying and selling, while giving customers a way to instantly compare price and availability across multiple manufacturers and products.
According to Lane Leskela, principal analyst at Gartner Group e-Business Intelligence Services, these benefits will translate into a booming demand for e-marketplaces.
He said by 2004, almost $US1 trillion worth of transactions will be conducted each year across e-marketplaces in the Asia-Pacific region alone.
Much of that activity will take place in Australia, where a number of e-marketplaces have already been set up as buyer advocacy procurement markets, operating across a number of different procurement-based product areas to source goods on behalf of large corporate buyers.
"Australia will be one of the three largest markets in the region and we believe that it will represent by 2004 nearly $500 billion," Leskela said. "That's the aggregate of buy and sell transactions going across networks that include companies and traders, suppliers and buyers."
Many existing e-marketplaces focus around products like chemicals, petrochemicals, metals, and health care products - industries with very extensive supply chains and major in-built inefficiencies. One company with special industry knowledge will typically act as aggregator for numbers of players on a hosted network.
And e-marketplaces are money-making propositions.
Leskela said unlike dot com start ups, where return on investment can be an afterthought, e-marketplaces have a revenue-generation model.
"Unlike the other part of the market, they actually start with the idea that they want to make a profit," he said.
And unusually, some of the most exciting developments in the e-market-place arena are occurring in the Asia-Pacific region at the same time as they are happening in North America and Europe.
"This is a real time event," Leskela said "We have telecommunications companies and ISPs along with financial institutions and very traditional industries, especially slow-growth, near commodity industries, that are actually pushing a lot of the vertical B2B e-marketplaces."
But Leskela warned that while e-marketplaces provide a tremendous opportunity, suppliers and vendors need to continue to spend a lot of money at the back end of these systems in the interests of continuous expansion and integration.
Numbers of Australian businesses have taken the plunge into the B2B e-marketplace arena. Prominent examples include FoodConnect Australia, which has just piloted what it hopes will be a premier electronic trading and meeting hub; C&W Optus' MarketSite portal which will link into a global network of portals in the US, UK, Japan; and Solution 6's eccountancy.com for accountants.
David Maire, general manager of the Internet commerce group at Solution 6, said the company's stage one site had already demonstrated the value of an industry-focused portal.
"We believe the future lies in a more integrated approach where you have this portal or vortal' that has the content, the community, the context and the commerce capability, but also integrates applications," he said.
Telstra also sees e-marketplaces as vital to its online strategy, according to Libby Christie, managing director for eWorks, Telstra's online service to business customers.
"Many large organisations are entering those e-marketplaces with leveraged buying power in their own right and adding their brand and their customer base to these marketplaces as well as their supply base and creating new sources of revenue and wealth for their own companies," Christie said. "Many of them are setting them up under joint venture or separate legal entity-type operations, obviously with a view to eventually taking them to an IPO as a separate organisation with value."
According to Forrester Research, as e-marketplaces scramble to gain critical mass over the next 18 months, they'll cherish the buying and selling volumes of large companies.
The organisation said to best leverage this nonbalance-sheet asset - major corporations - should treat their participation in e-marketplaces as strategic partnerships, insisting on equity or other favourable terms in return for their volume.
Forrester also warned companies must act fast.
"The value of one company's participation won't be worth much once Net markets gain critical mass," a recent report said. "The majority of eMarketplace growth in industries like computers, paper and shipping will take place by 2002 - meaning the fate of market-makers in these supply chains will be sealed in the next 24 months.
"As online marketplaces expand in these industries, the key challenge will quickly move from capturing participants to keeping them."